Enough corruption

Former president of Zimbabwe Robert Mugabe is to face corruption charges before a committee of lawmakers. The committee has questions about the alleged exploitation of the country's Marange diamond fields.

Mugabe ruled Zimbabwe from 1987 to 2017, when he was kicked out of power and replaced by Emmerson Mnangagwa. The new leader has vowed to tackle the rampant corruption that plagues Zimbabwe.

In 2016 Mugabe said in a speech, “We have not received much from the diamond industry at all ... I don’t think we’ve exceeded US$2 billion or so, and yet that area has earned well over US$15 billion or more”. Parliamentarians say they want to ask Mugabe the basis for his $15 bn figure.

He has often been suspected of siphoning off the diamond-field profits. In 2017, an NGO report said billions of diamond dollars had ended up in the pockets of the military, intelligence chiefs, and the president. The NGO, Global Witness, exposes corruption and abuse of the environment.Jonathan Moyo, a former cabinet minister, said Mugabe’s ruling party even used diamond revenues to pay for political T-shirts and hats. The merchandise, for the 2013 presidential elections, amounted to $70 million, he said.

A former finance minister described diamond companies operating at Marange as a “cabal of rogue elements.” Tendai Biti said the cabal passed $2 billion a year to Zimbabwe's ruling elites. The country isn't the first in Africa to suffer endemic corruption in mining and natural resources. As we previously reported, a corrupt executive elite mismanaged Zambia’s state-owned mining firm ZCCM-IH.

The evidence for the corruption was in leaked documents we call theSafari Papers. We received them from contacts seeking to expose corrupt semi-state companies in Africa.

What’s the next step with Robert Mugabe? No date has been set for the committee hearing and it's unclear how far lawmakers can press the ailing 94-year-old former dictator.

We predict an underwhelming verdict from Emmerson Mnangagwa’s government. Despite its mantra of transparency and justice, we're likely to see neither for the man who stole billions from his people. Zimbabwe has a per capita GDP of $600, the third lowest in the world.​And there's a footnote. The unloved former first lady Grace Mugabe is also under investigation for ivory poaching.

ISRAEL’S Prime Minister Benjamin ("Bibi") Netanyahu faces four serious accusations of corruption. Police suspect him of accepting $300,000 worth of gifts over 10 years and of colluding with media tycoons to win favorable press coverage. Then there was an aide who tried bribing a judge to sidetrack a court case against Netanyahu’s wife, Sara.

On 13 February 2018, the police recommended that the state prosecutor should indict Netanyahu. They said enough evidence exists for charges of bribery, fraud, and breach of trust in the two main cases.

Case 1000 probes Netanyahu's acceptance of large benefits from businessmen. These include Hollywood producer Arnon Milchan and Australian tycoon James Packer.

Case 2000 details a deal he made with Arnon Mozes, publisher of the dominant Yediot Ahronot newspaper group. Netanyahu would advance legislation to weaken Yediot's competitor Israel Hayom, in return for favorable coverage.

The defiant prime minister insists the allegations are baseless and he will remain in office.This is not Netanyahu’s first recent brush with scandal. In 2016, accusations swirled around him over a conflict of interest in a contract with Germany for new submarines and naval vessels.

As he now pushes back against the charges, the question is whether the legal authorities can end his premiership by prosecution.

Israel is a democratic oasis in a region roiled in conflict. Any undermining of the Jewish state's stability could rock an already shaky Middle East.

Our sources have long reported a network of secret relationships between Israel and its Arab neighbors. Bibi has fostered contacts with Saudi Arabia, with whom Israel shares a fear of an expansionist Iran.

Out of the public eye, there is also close cooperation with Egypt and Jordan, who have peace treaties and diplomatic relations with Israel.

Covert agreements with Israel, despite stark religious and political differences, serve these stable regional states well. They are still reeling from the earthquake of the failed Arab Spring uprisings of 2011. They would never admit it, but these regimes would view a derailment of the Israeli state as a regional disaster.

Analysts wonder if Bibi’s potential fall could spark something akin to civil war in a divided Israel. It seems unlikely, but with fracture lines appearing in so many solid Western democracies, observers are not complacent.

Most Israeli analysts are still confident that justice can be served without running the ship of state aground.​​But others see the rampant corruption at the top as an alarming warning shot across the bow.

OUT of the blue, Saudi Crown Prince Mohammed bin Salman (MbS) ordered the arrest of a swathe of the country’s elite. He herded detained princes, ministers and businessmen into Riyadh’s Ritz Carlton hotel.

MbS explained this arrest of 500 people and freezing of more than 2,000 bank accounts, in November 2017, as “a crackdown on corruption”.

Among the “guests” held at the plush Ritz prison was Prince al-Waleed bin Talal. Worth $18.7 billion, he is the wealthiest man in the Middle East. He has holdings in Twitter, Citigroup, Plaza Hotel, Uber’s rival Lyft, and other corporations.

The Saudi authorities said they had identified $400 billion in assets linked to corruption. Bin-Talal alone paid a whopping $6 billion for his eventual release.

So what was behind this surprise attack that MbS launched on the Saudi establishment? Some accepted it as a genuine assault on corruption. Others said the aim was to shovel more than $100 billion into the state’s coffers.

Cynics, including this blog, think the purge was nothing more than a show of power by MbS, as he ascends to the throne.

Apologists for him argue that the crown prince is a force for good. He is tackling corruption, enhancing women’s rights, and combating extreme Islamists. He has pure intentions. Really?

For three years MbS has managed the Saudi-led campaign against rebel forces in Yemen. The war has killed an estimated 4,770 civilians and injured 8,270 more. A Saudi naval blockade of Sana’a has left tens of thousands starving, including children.

MbS owns a $300 million chateau and a $550 million yacht that he bought on a whim from a Russian billionaire. Recently, he was the mystery buyer of a $450 million Leonardo da Vinci painting.

So is MbS a reforming angel who cares about curbing expenses and purging corruption? ​No, we think not. There's nothing to see here.

Cyril Ramaphosa won the leadership of South Africa’s ruling ANC last month. This positions him to succeed President Jacob Zuma, whose nine-year term has been marked by scandal and corruption. Zuma is finally to stand trial for kickbacks he may have received in a 1999 French arms sale facilitated by arms dealer Shabir Shaik. Zuma faces 783 corruption allegations in South Africa.

Little is known about the arms deal, which journalists believe was worth billions of dollars. Shabir Shaik himself was found guilty on two counts of corruption and one count of fraud in May 2005. The judge said there was an overwhelmingly corrupt relationship between him and Zuma. Shaik was jailed for fifteen years and served four.

Finally, Zuma will answer for his misdeeds and might face justice as Shaik did. A new book detailing the “cancerous cabal” that infected Zuma’s presidency is being published soon. Investigative journalist Jacques Pauw reveals the dubious corrupt connections that helped Zuma to power.

Among them was a security mogul who paid Zuma $70,000 a month to advance his interests. Zuma also may have helped a controversial manufacturer set up illegal cigarette trading in South Africa.

Many questions still swirl around Zuma’s 1999 arms deal, such as the name of the French company involved. Did the payouts mirror those in which Airbus was implicated over the years? Did Zuma actually engage in direct corruption with Airbus?​​Out of the 783 counts of corruption targeted against Zuma, which ones will stand up in court?

As we review the Safari Papers from Zambia, leaked to us by insider contacts, our researchers are continually amazed by the egregious examples of corruption and financial mismanagement they contain. ZCCM-IH, the parastatal company which holds the government's share of Zambia's mining industry, is the most conspicuous case showing just how mismanaged and corrupt a company — and a country — can become. The failing finances of ZCCM-IH have an impact on the national economy, "so bad that the IMF has turned down a bailout request", and on the ordinary residents of Zambia. So why is there no great fuss over this waste of what should be a lucrative national asset? The Safari Papers show that members of the Zambian government and ZCCM-IH's managers are using the company to increase their own wealth and power — and are doing so with impunity. Here's another example — the odd case of ZCCM-IH buying the Zambian bank Investrust.Investment in this bank has been a dubious proposition from the start, given its poor financial performance. ZCCM-IH first invested in the bank in 2011, when it bought a 10.6 percent shareholding. In April 2016, ZCCM-IH increased this share to 48.6 percent at a time when the bank had serious management and fiscal issues. Figures from October 2016 show that Investrust had an after-tax loss of ZMK 10.75 (about $2 million) in the first half of that year.This purchase took ZCCM-IH's stake in the bank above the government-set 35 percent limit for shareholding and the company was instructed to decrease its ownership to that limit. ZCCM-IH sold a few shares, taking them down to 45.4 percent, still way above 35 percent. So, not only did ZCCM-IH invest heavily in a bank that was in financial straits, but it also broke the financial rules regulating share purchases.In February this year (2017), ZCCM-IH decided to underwrite 100 percent of an Investrust Rights Offer to shareholders. According to documents we have, the Board Investment Committee of ZCCM-IH in May 2017 noted that the situation at Investrust was worsening and a run on the bank was possible, given its declining performance. Why then would the ZCCM-IH board approve the (unconditional) purchase of 4,458,730 shares — the 54.6 percent of Investrust not held by ZCCM-IH — from its minority shareholders for ZMK 11.44 a share?Does the ZCCM-IH board lack the basic ability to count? Even for them, buying a bank on the verge of collapse seems a step too far. Of course, such idiocy could be outweighed by the advantages of simply owning a bank — bringing all those opportunities to move money and assets around without alerting the authorities.​

So, back to ZCCM-IH, the eternally mismanaged Zambian parastatal company, as seen through the filter of the leaked documents we call the Safari Papers. (These were given to us by contacts who have an interest in rooting corruption out of so many government-owned companies in Africa).We notice that as the finances of ZCCM-IH have decreased, the board has repeatedly approved increases to the already generous entitlements of the CEO — one Pius Kasolo. The documents passed to us show that over the past few years of the CEO's tenure, the payments have been growing nicely.Now, theoretically, there is no problem with this — our aim is not to judge incomes, just to raise an eyebrow or two at their rationale. Yet we can't avoid questioning the wisdom of endlessly hiking payments and perks to a CEO who simply isn't performing, as we have highlighted in previous posts. So let's unveil some examples we have identified from the documents that our analysts are working through. * ZCCM-IH's "diversification into real estate" oddly extended to buying the CEO a large house. In June 2015, the board agreed to allocate $800,000 for the CEO to buy a residential property in an expensive area of Lusaka. This is a tidy sum in the Zambian real estate world, allowing the company to buy 30B Kudu Road, Kabulonga, Lusaka. It's a large gated property with generous grounds and a swimming pool, in the most exclusive area of town, close to the golf course. $780,000 was earmarked to purchase the property, plus $20,000 for renovations.* No surprise, the company pays for the CEO's maid and gardener. Keeping working Zambians employed is a good thing of course, but it would be more admirable if Pius Kasolo dipped into his own deep pockets to pay them, rather than have the company pick up the tab.* But wait — there's more. Kasolo is also now eligible for additional expenses because, as of December 2015, the CEO is not only senior ZCCM-IH management, should also be on the board. In securing himself this administrative perk, Kasolo became eligible for an extended range of allowances and entitlements, including (of course) up to $600 in expenses for the arduous task of getting to board meetings in the city, Lusaka, where he is actually based. * Let us not forget future generations. To this end, the CEO negotiated coverage of education costs for four children, effective from June 2016, backdated to January. * Worn out by these hardships, the CEO was back with hand outstretched in January 2017. The board allocated additional days of leave, local travel and subsistence allowances, foreign travel and subsistence allowances, increased allowance for a personal car, from $127,000 to $180,000, and an elevated education allowance for his children.With all this busywork of endlessly updating allowances for the CEO, the ZCCM-IH board apparently has had little time for such lesser matters as improving the company's operations.As we meander through the Safari Papers we may be unsurprised to find how ZCCM-IH is operating under a management so bad it is actually wasting a great deal of its income. And so, in a familiar African pattern, the luxuries and comforts of the Zambian elite continue to blossom while ordinary Zambians suffer dire economic straits. Remember, the situation is so bad that the IMF won't even touch the country. Watch this space!​

Why would a financially struggling company suddenly splurge on expensive new offices when the premises they have are perfectly perfectly adequate? Good question, and one that should be put to the board of the parastatal ZCCM-IH, in which the Zambian government owns a majority.

Our experts continue to review and analyze the trove of internal ZCCM-IH documents – we are calling them the Safari Papers – that our contacts bravely leaked to us. They have already and identified a chain of board-level decisions which at best indicate poor management, and at worst corruption, in a country already struggling with government debt and widespread poverty.

As noted in post one of the Safari Papers, ZCCM-IH’s management have failed to run the company effectively for a number of years now. One of the questions that post raised was whether the poor performance of the company was due to irresponsible mismanagement or corruption.

Our analysis of the leaked documents indicates that in at least one instance corruption seems more likely than mismanagement. That was when the company paid nearly US$4 million more than the government approved price for real estate in Lusaka. The chain of events that enabled them to do this are outlined below, with all the information taken from the internal documents we have uploaded as supplement to this post.

In March 2015 the management of ZCCM-IH proposed to the Investment Committee Board (ICB) of the company that they buy the Trinity Park real estate development – three office blocks in Lusaka – for $US9 million net of VAT.

Management presented the proposed purchase as an investment and a diversification into real estate. It ignored warnings that any investment return would take at least seven years. It ignored -{advice that the company needed to invest in projects or infrastructure that would bring immediate, regular returns.

So, from the outset, it seems the board, which should have been seeking investments to help the struggling company, was proposing a venture which would not yield returns for at least seven years.

The ICB approved the purchase of Trinity Park. However, the government of the Republic of Zambia (GRZ) did not give its approval. The GRZ Valuation Department was of the opinion that the offer price of US$9 million (exclusive of VAT)o was excessive. They assessed the value of the park at nearly USD 4 million less than the USD 5.1 million ZCCM-IH wanted to pay.

However, it seems that ZCCM-IH’s management was not happy with this, and in an apparent attempt to push the price up from US$5.1 million they brought in three firms to conduct "their own" valuations. The lowest of these was US$6.885 million whilst the highest was US$7.35 million.

These valuations were more than the government recommended price, but at this point were still well below ZCCM-IH’s original proposed bid of US$9 million. ZCCM-IH reportedly returned to the seller, Micmar, and negotiated a new offer of US$7.7 million (exclusive of VAT) in November 2015.

Despite all of this toing-and-froing the actual offering price had not been significantly reduced at all since the price, now including VAT, was US$9.05 million, for which the board obtained approval in December 2015.

The ZCCM-IH board needs to answer not one question, but many, about this payment:"Why did you pay well over market value for offices you didn’t need at a time when the company and the country were struggling financially?" "And, by the way, exactly what happened to the extra money you managed to get approved?"

The murky offshore world of lawyers and accountancy firms is finally being exposed as new revelations batter the once indestructible breakwaters that protect havens of tax avoidance and corruption. New waves of exposes are uncovering mass abuse of the international financial system for the benefit of the ultra-rich and over-privileged.

Voices are increasingly raised in indignation at the unprecedented inequality sweeping the globe and are clamouring to change the international rules of financial behaviour. In the midst of this, it is vitally important that "onshore" criminal corruption is not overlooked – the endemic corruption of politicians, government-owned companies, banks, and publicly traded enterprises.

We are lucky enough to be in contact with many ordinary people of conscience who realise the need to share factual information if we are going to stop the corrupt and powerful from misusing their privileges to grab ever more power and riches.

For this reason, our sources have chosen to release to us a wealth of documents from within a number of African countries which starkly illustrate the gross corruption now prevailing across the continent.

The results of this corruption are clear and visible. Political elites blatantly exploit the natural resources of their countries for their own greedy ends, leaving a majority of their citizens either struggling to survive or living in abject poverty.

In the coming months, we will be uploading evidence to verify how squalidly African governments, firms, politicians, bankers and businessmen are behaving.

While morally obliged to increase the prosperity and health of their peoples, they instead place themselves in strategic positions where they can benefit from corrupt practices and squander every opportunity to advance the welfare of their nations.

Part 1: Zambia's Plague of Ineptitude

Key sources have passed us information out of Zambia, providing us with a wealth of internal documents from ZCCM-IH – the majority government-owned, parastatal company, which owns shares in the country's mines. Zambia has the second largest copper reserves in Africa, second only to the DRC, yet it's recent inept, and potentially corrupt management, seems to be running the company into the ground.

Zambia as a nation has escaped much criticism levelled at sub-Saharan Africa by the West in the past and has in fact been labelled as a bastion of democracy, a model to be followed by other impoverished post-colonial states. In recent months and years, however, Zambia has become more and more authoritarian, sliding away from its contemporary history of stability and progress.

A state of emergency declared in summer 2017 allowed President Lungu to tighten his grip on power. The extended imprisonment of opposition leader Hakainde Hichilema effectively quelled the opposition, and the denial of a much-needed loan package of the IMF has pushed the country's finances to the brink of disaster.

Our team of researchers and reporters have trawled through the financial reports, minutes of meetings and other internal documents, From this, a picture steadily emerges of a company which has recently seen a rapid decrease in fortunes, despite Zambia's wealth of natural resources. Before we explore specific instances of corruption and mismanagement in our future posts, here first is an overview of ZCCM-IH's recent demise.

ZCCM-IH's financial situation was secure. In late 2014-2015 ZCCM was boasting of being the best-performing stock on the Lusaka Stock Exchange (appreciating 163.5 percent in 2014), having no debt, and valued at over $1 billion. In October 2014, ZCCM paid out a $40 million dividend to shareholders, one of the largest pay-outs ever by a listed company in Zambia.

However, in the few years since, ZCCM-IH has been run into the ground by corruption and nepotism. The company's financial reports for 2016 noted a turnover of 199 million Kwacha and an operating loss of 846 million Kwacha – approximately US$84 million. More recent financial reports filed in June 2017 again show losses for ZCCM-IH -- The company recorded a loss after tax of K84.6 million for the quarter ended 30th June 2017 (March 2017: loss K164.6million) compared to a budgeted profit of K31.7 million.

For example, Ndola Lime Company, a 100 percent subsidiary of the company, has gone from being very profitable and the main source of revenue for shareholder dividends to essentially wasting a US$100 million investment. This was meant to upgrade a plant which has not been completed, according to internal ZCCM-IH documents. There was a 46 percent decrease in the turnover of the Ndola Lime Company from ZMK 116.5 million in September 2015 to ZMK 62.5 million in September 2016.

Another example is Investrust Bank, which was apparently bailed out as a favour to a former Minister of Finance and not because it was a sound investment for ZCCM-IH. ZCCM's share in the bank was increased from 10 percent to 48.6 percent in April 2016, despite the bank having serious management and fiscal issues. According to figures from October 2016, Investrust recorded a loss after tax of 10.75 ZMK (approximately US$2 million) in the first half of 2016.

The purchase went through despite its being recognized as an unsound investment, according to internal ZCCM-IH documents. At a board meeting held on 26 May 2016, they reported that the purchase was one of the reasons for the company's poor economic performance in 2016.​​These briefly are just two examples of poor management and corruption at ZCCM-IH. As our perusal of the documents progresses we will share more in-depth analysis to highlight the ongoing plague of ineptitude gripping the African sub-continent.

ON Wednesday November 15, in the closing moments of the Dubai airshow, champagne corks began to fly faster than the fleet of 430 Airbus planes the company's ace sales shark had managed to steer past murky torrents of corruption scandals, to close the biggest deal in commercial aviation history. US investment firm Indigo Partners is buying the planes in a $49.5-billion contract brokered by Airbus' chief commercial officer, John Leahy.

​As the camera's clicked away and Leahy touted this latest and greatest deal to the BBC as a personal triumph, the scores of other media reporting the bonanza also neatly sidestepped a looming elephant – how such a sales titan has managed to stay so clean amid the shady third-party intermediaries Airbus uses to close deals in nearly every corner of the globe.

However, The New York Times noted that Indigo Partners, a US-based parent company of several low-cost carriers – including Hungary's Wizz Air, Frontier Airlines, Mexico's Volaris, and Chile's JetSmart – had received an undisclosed "fee" for every aircraft "sold" to each subsidiary airline. In this deal, 146 aircraft go to Wizz, 134 to Frontier, 80 to Volaris, and 70 to JetSmart, according to the website www.flightglobal.com.

This new deal indeed crowns the career of Leahy, the Airbus sales titan who took the company's market share from 18 percent in 1993 to 57 percent a decade later. Over his 20-plus years at Airbus, Leahy closed deals on more than 15,000 jets worth an estimated $1.7 trillion. But his latest sales triumph is a reminder that kickback isn't called a kickback when it's structured openly into a sales contract between two Western firms.Airbus' use of third-party contractors to secure deals in corrupt and autocratic countries has in the past been dismissed as simply necessary for doing business in such areas. Today, however, this "normal" practice is being investigated in a few countries around the world, bringing some optimism to the global struggle against corruption.

Leahy's name has been largely absent in media coverage of the several investigations, but this does not rule out the possibility of it arising later – after his retirement, perhaps – given the unfolding depth and scope of the corruption.

Meanwhile, Airbus CEO Tom Enders has pointed a finger at the Paris sales office as the source of many of the illicit sales practices that have drawn the scrutiny of British, French, and Austrian investigators. For example, the Paris sales office approved a €700-million payment to a Turkish national for securing a $10-billion sale of 160 aircraft to China.

There is also an investigation of several executives in the national airline SriLankan, over massive irregularities during the purchase of 10 Airbus planes in 2013. In Mauritius, the former head of government was bribed to buy six Airbus jets.

The French PNF is investigating Kazakhstan's then-prime minister and current chief of intelligence, Karim Massimov, who received millions in kickbacks for signing a deal with Airbus/ EADS to buy 45 helicopters for the Kazakh government in 2009. In addition to the Kazakh case, the French are also investigating a €70-million payment Airbus made to the son-in-law of Tunisia's ousted president, Zine El Abidine Ben Ali, following the purchase of 16 aircraft.

​It's possible that Leahy, based at Airbus HQ in Toulouse, had no idea what was going on at the Paris office. Even in such a benefit-of-the-doubt scenario, Leahy, as head of sales and operations should be held responsible for such gross negligence. But we should also question why the media are now loudly applauding what is essentially the same behaviour in a slightly different context.

Der Spiegel, on October 6, outlined several cases of Airbus corruption that are proving catastrophic for the company.

Our Airbus sources confirm that London-based Vector Aerospace received 114 million pounds from EADS, which was transferred to shell companies in Hong Kong, Singapore, and the British Virgin Islands. The money paid commissions for the sale of 18 Eurocopter helicopters to Austria, but also provided a slush fund for more kickbacks to come.

The sources say Tom Enders, Airbus CEO, was aware of the purpose of Vector and a Cypriot company, Omesco, which delegated offset deals to international clients.

Enders' strategy of acting as an anti-corruption superhero touting full transparency sets his sullied reputation against his knowledge of dirty payments to officials in the past.

The question is, will the CEO's strategy enable a plea bargain between Airbus and the investigators - the U.K.'s SFO and France's PNF? Or will these alleged watchdogs sink their teeth into proven corruption and start aggressive prosecutions in the multiple countries involved?

As we've previously reported, the French PNF has good reason to avoid such a crackdown. The corruption goes all the way to the Elysee - officials who have been implicated in Airbus kickbacks. Look no further than the sales of satellites to Kazakhstan.